Technical Setups for the Week
BALTIMORE (Stockpickr) -- Despite upward pressures that had the S&P 500 trading as high as 1246.73 during yesterday's market session, the broad-based index closed flat on Monday as large-scale selling started around 2:48 in the afternoon. Although that shift in sentiment was disappointing for investors, it was nothing if not understandable: The S&P had seen positive moves in each of the three preceding trading days -- moves that came after a critical push above market resistance at 1230.
Now, with the country's biggest indices trading above resistance, there's additional room for an upside move in stocks. Inflation and housing numbers this week could be just the catalyst investors need to spark the next round of buying, but buyer beware: The push above resistance has been tentative thus far, and worse-than-expected economic data could send markets lower as a result.
That's why we're on the lookout for high-probability technical trade setups -- technical positioning that makes it significantly more likely we'll see
than downside.
Technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock's chart patterns and trends. Once the domain of cloistered trading teams on Wall Street, technicals can help top traders make consistently profitable trades and can aid fundamental investors in better planning their stock execution.
Here's a look at
.
Comerica
(CMA) - Get Report
$7 billion commercial bank, Comerica has seen stellar performance in 2010, as shares rallied more than 37% year-to-date on improving fundamentals and actual growth potential.
While exposure to some of the worst-performing geographic areas in the country has taken its toll on the bank's valuation lately, it looks like shareholders have a shot at seeing new highs by December's last trading day. The stock's breakout last week will be the key to that movement.
Last week, shares of Comerica broke out above their $40 resistance level, plowing the way for higher ground in the future. $40 had previously been a price ceiling for shares seven times, making it a staunch support level now that shares have crossed above it. As a result, it's a good price to set as a maximum risk level. If you decide to go long shares, I'd suggest placing a stop below $40.
With previous resistance at $44, that level is a strong price target right now -- meaning that traders could be looking at a 10% upside in shares in the short-term. That kind of move becomes especially likely if the market continues its ascent this week.
Spectra Energy Partners
(SEP)
Spectra Energy Partners took a significant hit back at the beginning of the month following a 6.2 million-unit offering that priced units at $32.87. While the offering diluted unitholders' stakes in the master limited partnership, the proceeds are being used to pay off a loan that came under SEP's control following an acquisition.
As a result, the added units shouldn't negatively impact current stakes in the long-term. But that may not matter. In the short term, this MLP could see shares trade back up to current levels anyway.
Following the offering, shares gapped down below the 200-day moving average to $32.50 and have since consolidated, sitting right at $32.25 at yesterday's close. In the past, $32 has acted as support for shares, a good sign considering that that's the pricing that SEP's offering saw. That makes it more difficult for units to move much lower.
Instead, I'd expect units to fill the gap back up to $34 -- especially given the overall sentiment swing of the market. Place your stops around $31.50 to protect against a downside move, and bet on a price target of $33.50 on a bounce off of the support level that this stock is currently enjoying.
Scotts Miracle-Gro
(SMG) - Get Report
While Scotts Miracle-Gro has built its business around helping customers grow their lawns, this stock is seeing plenty of growth of its own in 2010. Shares have already rallied nearly 30% this year, including the yield from the company's 25-cent-per-share dividend. But that upside isn't yet limited, and now could be an ideal time to buy.
Right now, shares of Scotts are sitting right at trend line support at $50.50. That's an attractive buying level for new investors, because there's a limited, predefined downside risk to picking up shares right now.
But before you go buying, the question at present is whether the trend has broken in shares of Scotts.
That's because the 50-day moving average is closely overhead and has already acted as resistance on the previous two attempts higher. For the ideal setup, I'd recommend waiting for a break above that thin blue line before buying shares of this firm. Otherwise, risk-hungry traders seeking to get in now would be wise to place a protective stop at $49.50.
To see these plays in action, check out the
Technical Setups for the Week portfolio
on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.
RELATED LINKS:
>>How to Trade This Week's Earnings
>>5 Stocks Crossing the 200-Day Moving Average
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At the time of publication, author had no positions in stocks mentioned.
Jonas Elmerraji is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including Forbes and Investopedia, and has been featured in Investor's Business Daily, in Consumer's Digest and on MSNBC.com.